Haunts’ Kickstarter failure highlights the risks of crowdfunding

Promising game falls apart as money, programmers run out.

Many people seem to treat Kickstarter pledges as a kind of advanced preorder system, a way to register intent to purchase an intriguing project when it's still in the incredibly early stages of development. But investing in a Kickstarter project is really more like buying into a crazy dream that might not actually come true. That risk was highlighted this week with the unraveling of the development for Kickstarted multiplayer horror game Haunts.

Over 1,200 backers helped Rick Dakan and the development team at Mob Rule Games raise nearly $29,000 through Kickstarter this summer, enough to help recoup some of the $42,500 already invested to that point. But that money apparently wasn't enough to get Haunts across the finish line. As Dakan notes in a detailed Kickstarter update, the two main programmers on the game have been forced to move on to full-time jobs and will have minimal free time to devote to the final debugging and polish needed to get the game from its current threadbare version to a releasable state. Coding the game in the relatively obscure Go programming language means there's a limited pool of new programmers who could be brought in for that final push as well.

"This has been an emotionally rough couple of months for me, as I’ve invested almost all of my time for the past year or more in Haunts, along with my own money and reputation," Dakan writes. "It’s been terrible to watch it fail despite best efforts, but the failure is mine."

Dakan says he's still determined to get Haunts released in some form and is in talks with former colleagues at publisher Blue Mammoth Games, which might scoop up the game and finish development. Though the Kickstarter money the team raised has long been spent, Dakan says he'll personally offer out-of-pocket refunds to any backers who want to reconsider their support at this stage, and he'll give up any future revenue from the game to the publisher that eventually releases it.

Kickstarter, for its part, makes it clear in its FAQ that it doesn't guarantee the success of the projects it lists and can't directly offer refunds to backers of funded projects that are never completed. That said, the Kickstarter terms of use do put project creators under a legal obligation to deliver on their fundraising promises, and backers can theoretically sue.

Legal requirement or not, Haunts is the first in what's likely to be a wave of Kickstarter-funded games that simply fall apart before they become viable products (many non-game Kickstarters have already faced similar post-funding meltdowns). Much bigger games with much more traditional funding methods are delayed and cancelled all the time, sometimes publicly and sometimes quietly behind the closed doors of a developer. Getting money directly from potential players, and keeping them involved and updated in the development process, doesn't change the basic risks and uncertainties of the development process, as Haunts aptly demonstrates.

Projects with much bigger funding hauls than Haunts aren't any less likely to fail, either. Just because games like Double Fine's Adventure Game Kickstarter or Obsidian's Project Eternity have millions of crowdfunding dollars behind them, there's no guarantee that they will actually come out on schedule (or that they will be any good if they do).

Of course, the added press attention and big-name development teams for these massive projects do increase the pressure for the developers to make good on their promises. As Kickstarter notes in its FAQ, "launching a Kickstarter is a very public act, and creators put their reputations at risk when they do." But as Double Fine's Tim Schafer admitted up front in his project's first Kickstarter video, "either the game will be great or it will be a spectacular failure caught on camera for everyone to see. Either way you win."

If and when one of these massive Kickstarter games does become such a spectacular failure, the bloom may come off the rose for Kickstarter as a popular game-funding mechanism. Any really high-profile disaster is likely to make backers a lot more gun-shy about throwing their money at a project, no matter how safe and surefire it seems. In other words, people might stop seeing the service as a fashionable preorder boutique and more as what it is: an inherently risky investment in a still unproven idea.

If I were to do a software-based kickstarter, I'd put a clause in that says something along the lines of "If I am unable to complete the development by X date, all existing code and resources will be released under the GPL or some similar license."

Of course, Haunts wasn't helped, at all, by the decision to program the game in Go.

It does mean that in order to invest smartly through Kickstarter folks are going to have to take the time to do some research about how likely the people involved, the engine involved, and the grandiosity involved are likely to see resolution. Same as it ever was as far as I'm concerned. Investing of any sort has always been the informed man's game.

Too many people simply see Kickstarter as an extremely preemptive form of pre ordering a game... Rather than what it actually is, investing in an idea... and we should all know by now that there is no such thing as guaranteed success in any investment.

People need to understand that Kickstarter is an investment vehicle. There are no guarantees here, much like there are no guarantees in investing in the next big startup/IPO. It's for that reason that potential investors/customers need to be mindful of the scope of the project they're choosing to fund, as well as the individuals behind it. That's why I've only chosen to invest in a select few projects: Shadowrun Returns and Project Eternity. I believe both of those projects have very obtainable primary goals, as well as reputable developers behind them. That's enough to give me peace of mind.

I wasn't aware of the legal requirement from Kickstarter. WIth that in mind, I find it surprising that any entrepreneurial business venture would choose that venue. A legal requirement not to fail? Failure is part and parcel of the whole enterprise.

It seems Kickstarter is better suited to physical products, where someone has a working prototype, but needs the funds to buy the raw materials to get it to manufacturing. I've seen some pretty cool prototypes get manufactured this way.

Perhaps the only thing KickStarter needs is a banner going over the each level of pledge gifts:

Pledger will receive IF project completes:

to provide people a reminder that there is no guarantee.

More to the point, Kickstarter is already (at least philosophically) moving away from KickStarter as pre-order system, despite the fact that they make a bundle that way. Haven't seen too many companies walk away from money like that.

For my own kickstart history, yes I have invested in possible games. And I'm fully aware that they can fail. I research as much as possible to decide by risk based on the development already completed, if the kickstarter funds are enough, the reputation if the developers involved, and how much I can agree with the "vision". That said, I ja e only backed 3 games.Other kkickstarters very much are preorders; they say so in the description. kickstarter is more a media machine than anything else right now. Get big backing, get reported in Ars!And if there is transparency on how a project gets from kickstarter to finish, then that is almost worth investing all by itself, win or lose.

I hesitate to even think of Kickstarters as an investment, especially since what you receive if a project is successful isn't a traditional "return on investment." I think of it as distributed patronage, what I contribute to generally is only artists that I want to encourage to make art that I like. Even if they don't ever finish the project, my mission has been accomplished: I've given that artist the resources to pursue his art.

There have been some tech projects that I've funded, and it's exciting to see what people are doing, but in most cases I hardly expect things to come on time. My philosophy is "eventually i'll probably get something, hopefully". I'll never do the hugely expensive bundles, even if I want 20x of something, simply because of the odds it'll be delayed or never show up.

I think there was a very relevant quote in the bloomsberg article linked in the article above:

Quote:

Among technology and design-related projects, 75 percent didn’t finish on time, according to a study published last month by Ethan Mollick, a professor at the University of Pennsylvania’s Wharton School.

As opposed the the risks of having a game and/or game dev studio shut down by the publisher? We all know of so many games and studios that have been shut down mid development cycle, or even close to when a game was finished.

Yep, there are risks every where in the game industry, no matter what funding source a game dev studio uses.

Of course, Haunts wasn't helped, at all, by the decision to program the game in Go.

For the record, Go is actually great for server-side applications. But for desktop applications, there aren't many mature libraries for game development (game engine, graphics, sound, etc), especially since the game is supposed to be cross-platform.

I wasn't aware of the legal requirement from Kickstarter. WIth that in mind, I find it surprising that any entrepreneurial business venture would choose that venue. A legal requirement not to fail? Failure is part and parcel of the whole enterprise.

(Disclaimer: I am not a lawyer, I am not your lawyer, etc.)

It's not a legal requirement "not to fail". It's a requirement that they follow through on promises made and that Kickstarter ensures that they don't take on any responsibility in the event of failure.

If the listing says "You will receive x product in exchange for a pledge of $y," then the party who creates the campaign has a legal responsibility to provide x if the campaign has been successfully funded regardless of if the actual project being funded is completed. The problem, of course, is when the promised reward for pledging is inextricably tied to the would-be end product of the project (like a copy of the game). If the game never ships, then they've committed a breach of contract that potentially creates grounds for an investor to sue.

On the other hand, if the project is for a game, and the incentive to donate is a T-shirt and then if the project actually completes the investor will receive the game, then the project's creator has only the legal responsibility to provide the promised T-shirt if the game never actually finishes.

If nothing else, one would hope that this leads to other project organizers wording their listings more carefully or setting more realistic expectations about the rewards being offered.

I think of Kickstarts as a vote of confidence but not as a guarantee. Part of the vote of confidence also is a balance between how much I think they can deliver and what I'd like to receive if they do.

I understand that it can fail. I'll be disappointed too. Because I do really want to see them succeed and to get cool swag.

But knowing it's an investment, I'm prepared to accept failure from time to time too when it occurs.

Fixed. As punishment, I am making myself watch the Super Mario Bros. movie.

Nothing wrong with the Super Mario Bros. movie. If you want actual punishment, try the new Batman "movies".

Did I just step into the Twilight Zone Movie? So, you are telling me that you think the "Super Mario Bros." movie was better than the last three Batman movies? I think I'm going to have to have a lie down now.

And Kyle, since you didn't drive a bus full of nuns off of a cliff into a fire I don't think the crime justifies the punishment.

Many people seem to treat Kickstarter pledges as a kind of advanced preorder system

While it's perfectly reasonable to try to make sure people are educated on the risks of pledging, this is kind of weasel wordy, weak journalism. What exactly is "many" Kyle? Have you done a poll? I'm sure there are at least a few people who get carried away, but most people seem to realize they're taking a bit of a flyer. And by the same token, if you look at the distribution for pledges, most of them are at the bottom few tiers. $20 just isn't that big a deal, if 1/5 games at the price turn out to be a blast I'd still be way ahead vs my mistake in preordering Starcraft 2. Since you brought up Project Eternity, we can use that as illustrative: 74% of backers pledged $35 or less. 87% pledged $65 or less. That doesn't look like a ton of people pouring out their live savings.

Quote:

Projects with much bigger funding hauls than Haunts aren't any less likely to fail, either. Just because games like Double Fine's Adventure Game Kickstarter or Obsidian's Project Eternity have millions of crowdfunding dollars behind them, there's no guarantee that they will actually come out on schedule (or that they will be any good if they do).

You completely bungle this argument in at least two ways. First, your conclusion is simply logically disconnected from your premise. You argue that big projects aren't any less likely to fail, but then try to support it by saying there's "no guarantee," as in there's a non-zero chance of failure. That is embarrassingly stupid on your part. If one project has a 70% chance of failure and another has a 50% chance, Project B is less likely to fail but naturally "there's no guarantee". That's not how risk works. By its very nature, risk is probabilistic. We merely try to balance risk vs projected benefits.

Secondly, you bungle the actual putative causal link. No, merely having money doesn't prevent failure, but in general money isn't merely going to certain projects at random. Haunts didn't get $29k vs $4m simply because that's the way the dice fell. Factors like experience, existing development teams, how much of a project has already been done and can be demoed (ala FTL or Star Citizen) and so forth all matters. The money comes second, not first, and because of that yes, I'd say that projects being under taken by professional game development studios with years of experience and successful projects using standardized development tools are, in fact, less likely to fail then some dude in his garage using an obscure language.

Quote:

If and when one of these massive Kickstarter games does become such a spectacular failure, the bloom may come off the rose for Kickstarter as a popular game-funding mechanism. Any really high-profile disaster is likely to make backers a lot more gun-shy about throwing their money at a project, no matter how safe and surefire it seems.

And conversely, if and when one of these massive Kickstarter games succeeds wildly, or even a number of less massive projects like FTL, the rose may bloom further right? Kickstarters are still, relatively speaking, microscopic vs traditional publishing. It's a niche, and the majority of gamers are sitting it out. If some projects succeed and some fail, I don't think it'll change much except perhaps some people being more careful. If you buy a game you end up hating on Steam, no refunds there either.

Ultimately trying to make sure people are informed is a worthy goal, but this article was still a mixture of mediocre and insulting.

Of course, Haunts wasn't helped, at all, by the decision to program the game in Go.

For the record, Go is actually great for server-side applications. But for desktop applications, there aren't many mature libraries for game development (game engine, graphics, sound, etc), especially since the game is supposed to be cross-platform.

Really? I write server applications and haven't even experimented with Go because it is missing mature libraries for server side stuff.

Go looks awesome, but I think you would be an idiot to invest an significant amount of work into _any_ programming language as young as Go.

Give it another 15 years, and then maybe Go will be a good choice for large projects. Until then, it's just a toy/enthusiast language IMHO. For example, PHP is 17 years old now, and one of the most widely used languages in existence. But just a couple of years ago the stable version was pretty crap, and today the stable version is only "good". PHP 6.x looks like it will be really good, but we are probably at least 2 more years from being able to use it on production servers.

I wonder how much the language choice had to do with this project's demise? It seems like an unfamiliar (he can't have been using it for long) and immature tool set is just the kind of thing that would push a project way beyond it's expected deadline.

I hesitate to even think of Kickstarters as an investment, especially since what you receive if a project is successful isn't a traditional "return on investment." I think of it as distributed patronage, what I contribute to generally is only artists that I want to encourage to make art that I like. Even if they don't ever finish the project, my mission has been accomplished: I've given that artist the resources to pursue his art.

This is also how I see it. While there are many people who pledge just enough to get the game, I suspect that most of the larger contributors ($150+) are also looking at it as a form of patronage, rather than a purchase. $150 isn't really a reasonable amount to spend on buying a copy of a game, but it's a perfectly reasonable contribution from a patron who wants to encourage the creation of a preferred type of work.

With a product that can be replicated practically for free (any digital product), patronage seems like a much more sensible business model than "selling copies". People just need to have realistic expectations, and understand that creative work is subject to various uncertainties.

This type of funding model is broken, if it were venture capital the investor is expecting a return on his money, where this is just giving your money to something that may or may not happen and you will only get a game in return.

It is still an investment, albeit a very small one. In exchange for your investment of $20 or $25 or whatever, you get a copy of a game that (in most cases) will cost more than that upon its eventual release. The return is the $5 or $10 or $20 you save by buying the game before it is done. The risk is that it might never be, and your investment returns you nothing, not even itself. That is an investment.

It may or may not be a good investment; there's not enough data. (I.e. if we ultimately find that 50% of kickstarters fail, the kickstarter price needs to be below half of the final price in order for kickstarter to be a "good" investment from a financial standpoint, all other things being equal. This of course excludes consideration of the second-order returns (e.g. enjoyment of the game) arising from the possibility that if you don't Kickstart, the product may never exist at any price.

You can of course attempt to improve the odds of a return, and thereby decrease your risk, by taking investment steps like evaluating the project manager's past track record of on-time-successes. (Unfortunately an area where the game industry has a poor track record in general.)

I hesitate to even think of Kickstarters as an investment, especially since what you receive if a project is successful isn't a traditional "return on investment." I think of it as distributed patronage, what I contribute to generally is only artists that I want to encourage to make art that I like. Even if they don't ever finish the project, my mission has been accomplished: I've given that artist the resources to pursue his art.

This is also how I see it. While there are many people who pledge just enough to get the game, I suspect that most of the larger contributors ($150+) are also looking at it as a form of patronage, rather than a purchase. $150 isn't really a reasonable amount to spend on buying a copy of a game, but it's a perfectly reasonable contribution from a patron who wants to encourage the creation of a preferred type of work.

With a product that can be replicated practically for free (any digital product), patronage seems like a much more sensible business model than "selling copies". People just need to have realistic expectations, and understand that creative work is subject to various uncertainties.

-Kasoroth

Of course, patrons of the past had some rather unreasonable expectations sometimes, too: there were some pretty famous composers dropped by nobles who didn't like their latest work.

Of course, patrons of the past had some rather unreasonable expectations sometimes, too: there were some pretty famous composers dropped by nobles who didn't like their latest work.

Quite true. The nice thing about distributed patronage like Kickstarter is that the disapproval of one fan isn't as likely to kill your entire funding. There are still some things (like deciding to add DRM after saying there wouldn't be any) that might cause a mass uprising, but as long as there is mutual respect between the devs and the fans/patrons, it seems less volatile than having a single patron.

While there are many people who pledge just enough to get the game, I suspect that most of the larger contributors ($150+) are also looking at it as a form of patronage, rather than a purchase.

In addition to this, I've seen several people say with projects like Project Eternity that they are making donations based solely on the past, as a way of saying thank you for previous games that provided entertainment and joy and value well in excess of whatever the purchase price was.

It does represent an interesting way to reward some of the people who actually put in the blood and sweat to help create those past games for making our younger years a little better while preventing publishers and executives who contributed little or were actually a liability from leeching away most of it.

Key to this mindset is the idea that even if the project is never completed, the person has already gotten their money's worth. Thus that person considers the project to have no actual risk.

The article failed to address that the majority of kickstarters say where the game is at i.e concept, halfway done, need money to port to x platform etc. Saying its a "risky investment" makes it sound like kickstarter isn't worth while. I'm not saying that there aren't risks associated in pledging especially when it comes to the smaller or lesser known dev teams. People need to look at what the people are presenting like if they have an alpha phase game play like Grim Dawn or just an idea like Shadowrun returns. In this instance i'm out $10 if the game never sees fruition. I bought a license for me and a buddy. So I sacrificed eating lunch out somewhere once to support a video game that i thought looked awesome and something that I would enjoy playing. I'm willing to risk $5-10 on a project and if it fails oh well I'll be bummed but that is the nature of the beast. I'm not super comfortable with throwing a lot more money at a project unless it seems more solid. For example I gave DF $100. I already received everything but my copy of the game and the blu ray of the documentary.

In situation's like Haunts honestly this is where the community should come together to help. Not just to get the game finished but give some people who are trying to break into the game industry a chance. I for one offered my coding services to Rick.

Edit: To Rick's defense...he has offered refunds to anyone requesting it because of the situation. I have never heard of anyone doing that. To me that takes some grapes to make that kind of commitment to 1,214 people. Look at the star command guys they got a funded kickstarter (successful is not the term i would use with their management of money) then they did another one claiming they need the money to port the game to additional platforms....a game that hasn't even been released yet let alone have a release date. I'm not saying that star command doesn't look sweet but I chose not to back the 2nd kickstarter because of their first one.

I'm in agreement with Kasoroth. I've been dropping approx. 100.00USD on Kickstarters for Indy RPG developers, but I'm going in with the conception that I'm donating to a charitable cause I believe in. It's a bonus if I get something in return. Same concept as giving to NPR and getting a mug.

I've declined to fund Kickstarters, on the idea that while I'd like to buy any number of the games, I haven't been willing to "risk" my own money on a concept.

I don't fund kickstarters. Period. That solely because although Kickstarters can take money from backers worlwide, one has to be in the US to start a project.

Not even true, they allow people in the UK to start projects as well. It's just Kickstarter covering their basis legally and financially in any case, so the fact you don't like it is... well, rather shallow, to be honest.

I wasn't aware of the legal requirement from Kickstarter. WIth that in mind, I find it surprising that any entrepreneurial business venture would choose that venue. A legal requirement not to fail? Failure is part and parcel of the whole enterprise.

It's not a legal requirement "not to fail". It's a requirement that they follow through on promises made and that Kickstarter ensures that they don't take on any responsibility in the event of failure.

Yeah, the actual wording of the creator responsibility clause is as follows:

Quote:

If your project is successfully funded, you are required to fulfill all rewards or refund any backer whose reward you do not or cannot fulfill. A failure to do so could result in damage to your reputation or even legal action on behalf of your backers.

This seems to be a pretty standard "you need to follow through on what you promised" clause. It covers both success and failure actually. If a company says they'll give you a copy of the game if they finish it, then they finish the game, it's out for sale and so on, they can't then turn around and say "nah, never mind you need to buy the game after all." If they promise to stick your name in the credits, they need to stick your name in the credits, merely giving the game to you wouldn't be enough.

And if it fails and they can't follow through or offer refunds, then it's just spelling out the possibility that pledgers may try come to pick over the corpse. Nothing unusual there either, assuming they've been even vaguely professional they'll have properly segregated assets in an LLC or have a full corp set up and thus face no personal issues beyond reputation. wangstramedeous is right that failure and creative destruction are absolutely critical parts of an innovative economy, but that's not the same as having the failure be unstructured. We have bankruptcy law and limited liability for the very reason of structured failure.

Maybe it would be more compelling if the crowdfunding concept was extended to include "crowdinvestment". Instead of just paying for a glorified pre-order, how about getting a percentage back on successful products?

Could be a legal quagmire, of course, but it might make it more fun to plop down $50 on cool projects if there was a chance to make some money later.

Kyle Orland / Kyle is the Senior Gaming Editor at Ars Technica, specializing in video game hardware and software. He has journalism and computer science degrees from University of Maryland. He is based in Pittsburgh, PA.